Coverage - Exclusions

Turpin v. Manufacturers Life Insurance

An insurer successfully overturned an order for coverage on the basis that interpretive aids of reasonable expectation and nullification of coverage should not be applied in interpreting unambiguous terms in an insurance policy.

[2013] B.C.J. No. 1271

2013 BCCA 282

British Columbia Court of Appeal

S.D. Frankel, K.E. Neilson and Madam A.W. Mackenzie JJ.A.

June 17, 2013

The insurer brought an appeal of an order finding it was in breach of a contract of travel insurance providing coverage for medical expenses.

The insured suffered from abdominal pain and sought medical advice while in Victoria. No treatment was prescribed. Two days later she went to emergency in Victoria after her symptoms intensified. She was treated with an injection of an analgesic and prescription for antibiotics. Her symptoms resolved two days later after following the recommended treatment. The day after the pain resolved, the insured purchased travel insurance with the defendant insurer. The insured applied to the insurer for medical insurance and the insurer's agent presented an "off the shelf" policy without inquiry. The agent she purchased the insurance from told the insured there were limitations in the policy but did not explain them. The wording on the front page of the policy stated "PLEASE READ POLICY CAREFULLY BEFORE YOU TRAVEL". The insured did not read it. The policy excluded "pre-existing conditions or related medical conditions which were not stable and controlled during the 90 day period immediately preceding your effective date". Nine days later, while vacationing in California, the insured sought medical treatment after her abdominal pain returned.

She incurred expenses of $27,170 for her treatment in California and submitted an insurance claim. The insurer denied the claim on the basis of an unstable pre-existing condition. The insured was successful at trial. The trial judge held the medical coverage was nullified under the policy, however, recovery was available under the reasonable expectation principle.

The insurer's appeal was allowed. The trial judge erred in finding the principles of reasonable expectations and nullification of coverage overrode the unambiguous terms of the policy. The court agreed with the insurer that the principles of reasonable expectations and nullification of coverage will only apply to assist in construing an ambiguity. In this case there were no ambiguous terms in issue. Further, the court held that the exclusion, to exclude coverage for pre-existing medical conditions, is a reasonable and predictable exclusion.